Meeting the regulatory challenge

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Ensuring regulatory compliance is no small feat these days. But UnaVista, part of London Stock Exchange Group, helps customers to keep up to speed, as Lynn Strongin Dodds explains.

UnaVista is London Stock Exchange Group’s global hosted platform for all matching, validation and reconciliation needs. Offering an integrated approach across different asset classes and regulations, it helps clients comply and navigate the ever-changing financial services landscape.

”We have three post-trade pillars that all leverage the UnaVista reference platform,” says Mark Husler, CEO of UnaVista at London Stock Exchange Group (LSEG). “These include transaction reporting, trade confirmation and matching between brokers and clients or our reconciliation services. One of the main benefits is that clients only need one log-in and not several for the different functions.”

“Most of the conversations we have today are about regulation because there are so many new mandatory requirements and people are looking for a solution provider that can deliver solutions across multi asset classes and regulations, whether it is European Market Infrastructure Regulations (EMIR) Alternative Investment Fund Management Directive (AIFMD) or Financial Transaction Tax (FTT),” he adds.

The UnaVista Rules Engine acts as a central hub for the production of data, helping clients meet legislation requirements by extracting data from multiple internal sources and validating it using their own reference data and rule logic. The information is then normalised, converted and sent to the relevant regulators. The Rules Engine can, for example, calculate a firm’s net short position in each relevant instrument and provide a graphical overview of positions for short selling rules, while at the same time highlighting securities that are liable under the FTT in the jurisdictions where a firm operates.

Data can also be consolidated and the correct assets under management can be calculated for those having to meet the AIFMD. And UnaVista systems can be used to help foreign financial institutions identify US taxpayers and determine the annual closing balances of Foreign Account Tax Compliance Act (FATCA) eligible accounts prior to the disclosure deadline.Help with MiFID

UnaVista provides essential services relating to the Markets in Financial Instruments Directive (MiFID) too. In 2011, LSEG acquired the Transaction Reporting Service (TRS), the FSA’s Approved Reporting Mechanism (ARM), which was developed to provide firms with a method for meeting their MiFID reporting obligations. Following this, UnaVista can now, not only identify which of its clients’ transactions are eligible for transaction reporting, but also carry out the reporting itself.

The ‘hub and spoke’ technical infrastructure of UnaVista allows LSEG to migrate its TRS clients on to its platform with no negative effect on processing performance. The platform also delivers information in any format, while its auditing and reporting dashboard enables firms to get a detailed picture of that information. All clients were on-boarded and reporting within the six months timescale. Today, UnaVista processes 1.5 billion trades per year for 700 customers under MiFID reporting requirements while a number of the new clients have taken advantage of UnaVista’s additional services, such as replay and reconciliation solutions, global and MiFID targeted reference data and the confirmations platform.

Data storage

This wealth of expertise means that UnaVista is well placed as one of the four trade repositories (TRs) under the European Market Infrastructure Regulation (EMIR). The registrations took effect on November 14, 2013 and trade reporting was set to start in February, 2014.

TRs are responsible for storing data related to derivatives trades, that can be easily accessed by regulatory authorities including national regulators, the European Securities and Markets Authroity (ESMA), the European Systemic Risk Board and European central banks. Each trade report requires around 85 pieces of data and some have to be reported up to eight times, depending on the number of intermediaries involved in a transaction. Participants also require a legal entity identifier (LEI), identification codes that enable consistent and accurate identification of all legal entities that are parties to financial transactions, including non-financial institutions.

Preparing for the new rules required considerable effort across the market but UnaVista focused on making the transition as seamless as possible.

“UnaVista called on its experience with MiFID to assist its customers to be ready for the February go-live date”, says Husler. “Unlike our competition, we already had a constructed data model so the system could be configured quickly and clients could place their data into the Rules engines. There are also a lot of similarities between MiFID and EMIR in that they are both T +1 regimes plus they both cover exchange traded as well OTC asset classes. They also both require on-boarding clients. We have seen a positive response from customers using our test environment and many have already signed up to our trade repository.”

UnaVista has also tapped into LSEG’s proficiency as the UK’s National Numbering Agency for ISINs and CFIs reference data in its role as an authorised Pre-Local Operating Unit (LOU) for the global allocation of Pre-LEI. Endorsed by the Regulatory Oversight Committee (ROC), the platform provides an advanced look-up service to access all Pre-LEI reference data in one database plus the ability to view, filter, manipulate and extract data which has been consolidated through a single tool. “One of the biggest challenges is not the technology but getting firms to get their LEIs,” says Husler.

As with all regulation, the green light to be a TR and offer LOUs is only the first step on a long road. As Husler notes, “We are currently waiting for the technical standards to be finalised under EMIR but look at MiFID: it was adapted differently in each country and the regulation continues to evolve. The same will be true with EMIR which is why it is important to be nimble and have a flexible platform.”